Indeed, occupier demand rebounded after falling for two consecutive quarters, with 28% more respondents indicating rising rather than falling demand. This turnaround was led by the retail sector, which was the stand-out performer according to more than 41% of respondents. Availability of commercial space continued to rise, and is continuing to exert downward pressure on rents, with rental value expectations remaining negative (although less so than the previous quarter).
Very little work started on new developments in the first quarter, continuing the trend seen over the past six months. With almost three years of falling or flat development, rising levels of occupier demand throughout the course of 2012 could eventually feed through into falling levels of space and support rental growth expectations. That said, there is still a supply overhang in the beleaguered office sector, where rents are expected to continue falling into 2012.
Turning to the investor market, sentiment improved significantly in the first three months of 2012 with 28 percent more survey respondents reporting a strong rebound in investment enquiries. This is a significant turnaround given the generally negative trend in enquiries over the last couple of years. Expected investment transactions also turned positive, with respondents more optimistic about the outlook in 2012. Capital values, although still falling, did so at a much slower rate in Q1. This could be indicative of commercial values starting to bottom out with a stabilisation in prices possible later in the year.
Commenting on the Q1 survey results, Simon Rubinsohn, RICS Chief Economist, said, “Looking ahead, the rise in investor sentiment could reflect the UAE’s status as a safe haven in the region, and the RICS availability of investment funds indicator turned positive this quarter. The continued political uncertainty in the Middle East region could lead to a sustained rise in investment inflows to the UAE in the coming year.”
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